US and allies target Russia's central bank, sovereign funds in fresh sanctions

WASHINGTON • The United States yesterday blocked Americans and companies from engaging in any transactions involving Russia's central bank, National Wealth Fund and its Finance Ministry in further punishment of Moscow over its invasion of Ukraine.

The fierce economic sanctions imposed by the US, along with others taken by US allies, will make it hard for the Russian central bank to use its vast reserves of hard currency to buy roubles.

They are likely to drive Russian inflation higher, cripple its purchasing power and drive down investments, US officials said yesterday as the new sanctions took effect.

The move comes after the US and its allies last week imposed several rounds of sanctions targeting Moscow, including against Russian President Vladimir Putin and Russia's largest lenders, after the country's forces invaded Ukraine.

The US Treasury Department in a statement yesterday said it had also slapped sanctions on another key Russian sovereign wealth fund, the Russian Direct Investment Fund and its chief executive Kirill Aleksandrovich Dmitriev, a close ally of Mr Putin.

"The unprecedented action we are taking today will significantly limit Russia's ability to use assets to finance its destabilising activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine," US Treasury Secretary Janet Yellen said in a statement.

The US and European Union blocks on the Russian central bank's assets will immobilise nearly half of Mr Putin's war chest, according to a Treasury spokesman. Roughly 13 per cent of the Bank of Russia's reserves are held in China, she said.

Mr Putin's war chest is an estimated US$630 billion (S$855 billion) in reserves, the officials said, and the measures are aimed at blocking his ability to sell those to mitigate financial pressure domestically.

Russia's own data published in January shows that US$100 billion of the reserves were held in US dollars as at June.

International energy major BP, meanwhile, has opted to leave Russia following Moscow's military attack on Ukraine.

BP, the biggest foreign investor in Russia, said it was abandoning its stake in state oil company Rosneft at a cost of up to US$25 billion, shrinking its oil and gas reserves by half.

In Britain, Prime Minister Boris Johnson said he will intensify a crackdown on "dirty money" by introducing the government's Economic Crime Bill to Parliament, a step brought forward in response to Russia's invasion.

The much delayed legislation comes as many opposition lawmakers and those in the governing Conservative Party have called on Mr Johnson's government to do more to stop the flow of Russian cash into London, dubbed by some as "Londongrad".

"There is no place for dirty money in the United Kingdom. We are going faster and harder to tear back the facade that those supporting Putin's campaign of destruction have been hiding behind for so long," Mr Johnson said.

"Those backing Putin have been put on notice: There will be nowhere to hide your ill-gotten gains," he said in a statement.

Even neutral Switzerland said it was adopting EU sanctions and freezing assets of some Russian individuals and companies. It joined others by imposing sanctions on Mr Putin and other officials.

The EU, meanwhile, is set to ban Russia's state-owned broadcaster Russia Today, news agency Sputnik, and their subsidiaries.

REUTERS, BLOOMBERG